Reforming for the sustainable development of Hong Kong; EY comments on the 2024 Policy Address

Themed “Reform for Enhancing Development and Building Our Future Together”, the 2024 Policy Address delivered by John Lee, Chief Executive (CE) of the Hong Kong Special Administrative Region, actively responds to the third plenary session of the 20th Central Committee of the Communist Party of China, to consolidate Hong Kong’s status as “three centers” – an international financial, shipping and trade center, to support the building of an international high-end talent gathering place, to focus on economic development and improving the overall quality of life. Through the Hong Kong spirit – to strive and to triumph, the government continues to lead all sectors of society to embrace innovation and change together, so that economic and industrial development can effectively serve the national plan.

Jasmine Lee, EY Hong Kong and Macau Managing Partner, agrees that economic recovery can be effectively boosted by the series of reformative measures outlined in the Policy Address and lay a foundation for long-term development. Focusing on the betterment of the overall livelihood of the people and focusing on development are essentially two sides of the same coin. Jasmine Lee says: “We are in support of the reforms outlined, including those in finance, shipping and trade, innovation and technology (I&T), education and talent, housing, healthcare and elderly care, as well as promoting interconnectivity within the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) through the construction of the Northern Metropolis as part of the long-term development blueprint for Hong Kong's economy, all the while with social welfare as a top priority. The EY teams will continue to fully cooperate in support of government policies and guidelines.” (Read full report)

Consolidate the international financial center

Collaborations and developments need to be deeper, broader and more focused for Hong Kong to consolidate and enhance its status as an international financial center. The Policy Address further optimizes the securities market and develops new sources of funds from overseas. Jacky Lai, EY¹ Hong Kong Capital Market Services Spokesperson, says: “Amidst the vacillating changes in the global economic environment, Hong Kong's status as an international financial center remains strong. The Saudi Capital Market Authority has approved the listing of the first exchange-traded fund (ETF) investing in Hong Kong stocks in Saudi Arabia. This not only strengthens the connection between the financial markets of the two places, but also provides investors with more choices and consolidates Hong Kong's reputation as an international financial hub.”

Jacky Lai adds: “Numerous prospective measures will be piloted in the Province of Guangdong, according to the Second Agreement Concerning Amendment to the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) on Trade in Services. Such arrangements, once again, reflect the pivotal bridging role played by the GBA, utilizing its advantages of one country, two systems, three customs territories and three currencies. Hong Kong is a crucial node linking the region to global markets and aligning with international standards. Maintaining its unique position, Hong Kong ought to continue to act as the ‘super connector’.”

In terms of strengthening the offshore RMB business hub, Paul Ho, Financial and Currency Connect Leader, Hong Kong and Macau, EY Greater Bay Area Center of Excellence, believes that continuously optimizing the mutual market access regime, providing more RMB-denominated investment products, and actively discussing the expansion of the Bond Connect (Southbound Trading) will help facilitate the flow of RMB funds. Paul Ho says: “These initiatives would not only enhance the vitality of Hong Kong's financial markets but also further promote the development of the offshore RMB ecosystem. This would further strengthen the inter-connectivity of people, logistics, and capital flow, attract more investors and align with the country’s financial development strategy.”

Paul Ho also adds: “The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China are expediting the linkage of the fast payment systems in both places, enabling residents to make real-time, small-value payments for residents in both places. These measures not only facilitate individual users but also attracting more participations of consumers and merchants, promoting economic activities and increasing transaction volume. This payment systems interconnection will enhance Hong Kong's status as an international financial center. With the development of financial technology, financial institutions in Hong Kong can make use of innovative services to improve customers’ experience and further enhance competitiveness. This will contribute to the diversification and sustainable growth of the financial market in Hong Kong, boosting the overall efficiency of the financial system.”

“By HKMA adjusting the maximum loan to value ratio for residential properties to 70%, regardless of the value of the properties, whether the properties are for self-use or held by companies, and whether the purchasers are first time home buyers, while the maximum debt servicing ratio will be adjusted to 50%. Such adjustments lower the threshold for entry into the market and stimulate demand. It is easier for investors to obtain loans for self-occupied and company-owned properties, leading to an increase in investment activity amid the recent recovery in the market. As for non-residential properties, the loan conditions are also being adjusted, which will also prompt investments to expand.” Paul Ho comments.

Develop diversified funding sources

Business development opportunities between Hong Kong and major markets in Southeast Asia and the Middle East will be further explored. Jasmine Lee notes: “The government’s exploration of capital opportunities in the Middle East has achieved heartening initial results. It is sensible for Hong Kong to continue seizing its advantages as a longstanding international financial center, and make good use of relevant experiences in issuing Islamic bonds to develop an Islamic financial platform to connect Middle East funds and investment targets.”

Karina Wong, EY Greater China Business Tax Services Leader, Private Tax Co-leader and Family Enterprise Leader, says: “Hong Kong will become the world’s largest cross‑boundary wealth management center by 2028, reflecting international investors’ confidence in the environment, supporting facilities and products found in Hong Kong’s financial market. We may also explore further opportunities such as expanding the qualifying transaction for tax concessions of Single Family Office (SFO) and Unified Fund Exemption, enhancing the certainty for SFO talents obtaining working permits in Hong Kong, as well as expanding the eligible tax deduction for philanthropic expenditure and revising the criteria of tax-exempt charity under Section 88.

Karina Wong welcomes the enhancing of the eligible assets of the New Capital Investor Entry Scheme (CIES), which will effectively attract high-net-worth individuals with more diversified investment portfolios to settle in Hong Kong.

Wilson Cheng, EY² Hong Kong and Macau Tax Leader, says: “In addition to enhancing existing tax policies for the maritime industry, tax concessions and support measures to attract commodity traders will no doubt further promote Hong the shipping business in Hong Kong. We welcome the government’s effort in aligning its policies to national policies to strengthen capacity as an international shipping hub and Hong Kong would act as a “super-connector” and a ‘super value-adder’

In terms of fostering the trade of liquor, Wilson Cheng further adds: “With immediate effect, duty for liquor with an import price of more than HK$200 would benefit from a reduction to duty rate from 100% to 10% for the portion above HK$200. Such a sharp reduction shows the government’s determination to boost the economy and promote Hong Kong as a trading hub for liquor. At the same time, the government tried to distinguish between high value and low value liquor to address potential impact to local community.”

Build a high-end international talent hub

The Policy Address affirms the effectiveness of current initiatives for the trawl of talents, and proposes new measures such as expanding the scope of the Top Talent Pass Scheme, visa extensions, and promoting the integrated development of education, technology, and talent. Jasmine Lee says: “These measures not only expand the overall talent pipeline, but also improve the pertinence of specific talents, which, in turn, can effectively gather truly international high-quality talents in Hong Kong."

Committed to sculpting Hong Kong into an international hub for post-secondary education, promoting the “Study in Hong Kong” brand with diversified career pathways. The Hong Kong Metropolitan University (HKMU) has been recognized as the first university of applied sciences in Hong Kong. Jasmine Lee notes: “Moving forward, collaboration between institutes and enterprises should be strengthened, encouraging local colleges and universities to establish internship and training opportunities with enterprises for students to enhance experience and competitiveness for students’ career. The diverse academic disciplines provided by HKMU are also conducive for cultural exchanges. Universities may co-organize with multinational companies cultural exchange activities to give a boost to the city’s appeal on the global stage. The government can also provide more support services to help newly arrived talents and their families become more professional. Supportive measures in, say, language courses, community integration activities and mental health support, assisting non-local talents to adjust to life in Hong Kong will build and retain a stronger and more refined talent pool.”

The report also mentioned that the government will publish the “Northern Metropolis University Town Development Conceptual Framework” in 2026 to encourage cooperation between local institutions and international institutions, as well as to support the establishment of a third medical school, paving the way to befit an international health  and medical innovation hub. Jasmine Lee said: “We anticipate that the Northern Metropolis University Town and the third medical school can further gather education and research talents. On the other hand, the institutions established in the Northern Metropolis University Town should have a unique positioning that is completely different from existing tertiary institutions to maximize their success.”

Smart cities are convenient and beneficial to the people

The Policy Address continues to emphasize on the facilitation promote data circulation in the GBA. Vincent Chan, EY¹ Greater Bay Area Technology and Data Connect Leader, says: “The pilot implementation of the ‘Standard Contract for Cross-Boundary Flow of Personal Information within the Guangdong-Hong Kong-Macao Greater Bay Area (Mainland, Hong Kong)’ (The GBA Standard Contract) has considerably simplified the procedures of data flow between Hong Kong and other GBA cities. With the GBA Standard Contract as a basis, leading with the successful examples of enterprises coupled with education to the public, I believe that residents in the entire GBA will ultimately benefit when measures to facilitate cross-boundary flow advances. Cross-boundary health records and personal folder in ‘eHealth’ are compelling instances where, adopted on a voluntary basis, cross-boundary flow of personal information ultimately benefits residents within the GBA.”

Vincent Chan notes: "The government has accelerated the development of the digital economy and launched about 20 digital government and smart city solutions, including the use of locally developed generative artificial intelligence in the Digital Policy Office and multiple innovation parks. Through various advanced technologies, our society can become more effective and improve the quality of life for the public. This will not only have a positive impact on society, but also make the cooperation zone an important source of new quality productivity for the country and promote sustainable economic growth and development.”

“We are also pleased to see the application of artificial intelligence in the medical field, especially in the screening and prevention of common cancers. The government’s commitment to innovation will help reshape many industries,” Vincent Chan adds.

The Major Transport Infrastructure Development Blueprint for Hong Kong as well as multiple cross boundary railway projects are to commence construction this and next year. Steve Lewis, EY³ Partner, Hong Kong Leader of Infrastructure, Capital Projects and Construction Advisory, says: “Movement within the GBA has become the new norm for a large portion of the population. With these projects being progressed at pace, the linkage between Hong Kong, Shenzhen, and the rest of the GBA is to be greatly enhanced, bringing ease to frequent travel across boundaries and boosting interconnectivity. On the other hand, completion of numerous key infrastructure projects are coming into sight as the Northern Metropolis is taking shape and maturing. The continuous infrastructure development of the Hong Kong-Shenzhen I&T Park in the Loop, the Hetao Shenzhen Hong Kong Science and Technology Innovation Cooperation Zone, along with the plethora of surrounding facilities are of significance in attracting world class I&T and R&D capabilities and talent to Hong Kong and the wider GBA.”

Green finance promotes carbon neutrality

Ee Sin Tan, EY¹ Hong Kong and Macau Climate Change and Sustainability Services (CCaSS) Partner, says: “In line with Hong Kong’s carbon-neutrality targets, the proposed ongoing development of the new energy transport industry through green maritime fuel bunkering facilities, sustainable aviation fuels and their supply chains will not only address hard-to-abate emissions but also will enhance Hong Kong’s status as an international shipping and aviation hub. Significant collaboration with innovation and technology partners will be required to accelerate the development of green maritime fuel, sustainable aviation fuel and hydrogen applications and their adoption in Hong Kong.”

Ee Sin Tan adds: “As part of promoting the sustainability development of Hong Kong, the Policy Address has particularly focused on promoting arts, culture and creative projects in society to cement Hong Kong’s position as an East-meets-West Centre for International Cultural Exchange. We are pleased to see the support for West Kowloon Cultural District as a must-visit tourism landmark, and to serve as a springboard to showcase curated programs and exhibitions locally, in the Mainland and overseas.”

1. Ernst & Young, Hong Kong
2. Ernst & Young Tax Services Limited
3. Ernst & Young Transactions Limited

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